Ontario Auto Insurance Topics

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Monday, 14 November 2016

On Saturday I will be signing copies of THE ROAD AHEAD at Bookapalooza in Whitby. It’s a great event with books and crafts for sale, panel discussions, giveaways and a silent auction. There will also be a draw for free signed copy of my novel, which will make a nice gift with the holidays coming up.

Tuesday, 18 October 2016

FSCO's latest quarterly rate approval numbers have been released and the news is not good for consumers. Half the savings as a result of statutory accident benefit cuts that became effective on June 1 are already gone.

FSCO approved 25 private passenger automobile insurance rate filings during the third quarter of 2016. These 25 insurers represent 63.56% of the market based on premium volume. Approved rates increased on average by 1.5% when applied across the total market. This wipes out almost half of the modest 3.07% reduction in approved rate filings in the first quarter of 2016. Depending on rate filings in the last quarter, we could see a net increase in rates for the 2016 calendar year.

The government has abandoned the the 15% rate reduction promise made in August 2016. However, if you aggregate all the rate changes since the 2013 announcement, the total rate reduction is 8.34% when applied across the total market.

Product reforms have proven to be an ineffective tool for controlling auto insurance premiums in Ontario. As long as transactional costs within the system remain high, Ontario drivers will continue to pay high rates. A new delivery system is needed to bring Ontario's costs in line with other jurisdictions. For a discussion on how to address the systemic problems in Ontario, see my article entitled Ontario's 25-Year No-Fault Journey.

Effective April 1, 2016, the Licence Appeal Tribunal began accepting applications to the new Automobile Accident Benefits Service (AABS) system with an aim to quickly resolve disagreements between individuals and insurance companies about statutory accident benefits. The guiding principles created for new Tribunal were originally developed by Justice Douglas Cunningham and myself in a report released in 2014. Over the past few month, there have been a handful of decisions from the Tribunal. I decided to review nine decisions to determine whether there were some early trends.There seven written hearings and two oral hearings. The two oral hearings were conducted by teleconference. This is consistent with the direction provided in the Cunningham report that the majority of hearings should be conducted through written submissions.Many FSCO decisions dealt with procedural issues rather than benefit entitlement. Often, hearings were held to listen to preliminary issues. Although the sample size is small, it appears only three decision did not deal directly with benefit entitlement. One dealt with a claimant failing to attend insurer examinations, Another dealt with whether a claimant had the ability to elect to receive either the non-earner benefit or income replacement. The last one involved a claimant trying to claim the cost of preparing an application on an issue that was resolved prior to the case conference. These decisions may suggests that the LAT process may also be bogged down with procedural issues. This is not what Cunningham had envisioned.The average time between the hearing date and the release of a decision was 51.5 days. This is a significant improvement compared to FSCO timelines but we need to remember it's still early. Let's see how this trends in the future. The decisions themselves have been very short. Somewhere between five to ten pages. I did not review the quality of the decisions made by Tribunal adjudicators. I leave that for the users to determine. However, so far, the first few decisions have lived up to the reforms objective of a more expeditious process.

Rick Tompkins, a suburban Toronto insurance broker, never considered a career in politics until a good friend, who happens to be the leader of the Conservative party, asks him to run for office. He accepts the offer, with the understanding that he would probably not win, but can use the opportunity to gain some visibility for himself and his business. Jerry Switzer, a veteran party worker, is sent in to guide Rick through a campaign in a riding that hasn’t elected a Conservative in years. Rick fumbles his way through the election campaign and manages a surprise win but at the expense of saddling his party with an impossible commitment. What makes matters worse, Rick is anything but politically correct. He offends everyone in his path and stumbles from one political scandal to another. Still, Rick has one saving asset: a political party machine that is able to spin scandals to its advantage.

Sunday, 21 August 2016

As I reported previously, the Ontario government amended the fleet definition in Regulation 664 in early July. The amended definition reads as follows:

“fleet” means a group of not fewer than five automobiles that meets the following requirements:

1. At least five of the automobiles in the group are commercial vehicles, public vehicles or vehicles used for business purposes.

2. The automobiles in the group are,

i. under common ownership or management, and any automobiles in the group that are subject to a lease agreement for a period in excess of 30 days are leased to the same insured person, or

ii. available for hire through a common online-enabled application or system for the pre-arrangement of transportation, and insured under a contract of automobile insurance in which the automobile owner or lessee, as the case may be, has coverage as an insured named in the contract

From my perspective, this is not an ideal resolution. However, it does fill in the insurance gap that has existed since Uber began providing its services in Toronto in 2012. One of the most important elements in the fleet definition has always been the requirement that there be common management. Common management is an element that is required in order for a group of vehicles to be considered a fleet, if they are not commonly owned or where they are owned by a leasing company. It refers to the fact that the owner or manager has a measure of control over the vehicles. A fleet is typically a discrete risk exposure whose experience and characteristics can be monitored and rated, and is affected by the actions of the owner or manager. The vehicles in a fleet are not individually rated as this is inconsistent with a key principle in fleet rating to establish a rate specific to the experience of the fleet. Usually, the manager of a fleet will implement rigorous risk management programs to monitor and improve experience and rating.

None of these circumstance remotely exist when it comes to Uber drivers and their vehicles. They are network of drivers connected to customers through an app provided by Uber. Their is no common ownership or management. It suggest that once an Uber driver turns on the app on his phone, he or she becomes part of a fleet. That decision isn't even made by Uber.

Is this such a bad thing? It could be if it leads to further erosion of the fleet definition. The regulator has for years denied fleet policies because they failed to meet the test of common ownership or management. Will they be able to continue to push back against synthetic fleets? It would have been better, if the government had created a provision in the Insurance Act to deal specifically with transportation network companies. I expect it will take some time to determine whether the government and the insurance industry will regret the newly amended fleet definition.

Tuesday, 19 July 2016

FSCO's latest quarterly rate approval numbers have been released and suggest that consumers will see very few savings the statutory accident benefit cuts that became effective on June 1.

FSCO approved 14 private passenger automobile insurance rate filings during the second quarter of 2016. These 14 insurers represent 30.06% of the market based on premium volume. Approved rates increased on average by 0.33% when applied across the total market. This follows the modest 3.07% reduction in approved rate filings in the first quarter of 2016.

The end of lower rate filing approvals indicate that the any savings derived from the recent reform package are small. A portion of the savings could be wiped out before the end of the calendar year if companies continue to file for increases. The government has abandoned the the 15% rate reduction promise made in August 2016. However, if you aggregate all the rate changes since the 2013 announcement, the total rate reduction is 9.84% when applied across the total market.

Product reforms have proven to be an ineffective tool for controling auto insurance premiums in Ontario. As long as transactional costs within the system remain high, Ontario drivers will continue to pay high rates. A new delivery system is needed to bring Ontario's costs in line with other jurisdictions. For a discussion on how to address the systemic problems in Ontario, see my article entitled Ontario's 25-Year No-Fault Journey.

Friday, 8 July 2016

New regulations are now in effect if you repair, tow or store vehicles in Ontario. The new regulations under the Repair and Storage Liens Act took effect on July 1, 2016. Further regulations will come into force starting January 1, 2017.

The following new rules come into effect on July 1, 2016:

If a vehicle being stored is subject to a lien and is received from someone other than its owner or a person having the owner's authority, then the storer must give notice to the owner and other interested parties of the lien in writing (e.g. secured parties who have registered their interest, such as lease and finance companies).

For vehicles registered in Ontario, the notice period is reduced from 60 days to 15 days after the day after the vehicle is received. If notice is not provided within 15 days, a storer's lien is limited to the unpaid amount owing for that period. The 60-day notice period remains unchanged for out-of-province vehicles.

If no amount has been agreed upon for repair and storage costs, fair value may be determined by a court. There is a new list of discretionary factors a judge will be required to consider (such as fixed costs, variable costs, direct costs, indirect costs, profit and any other relevant factors).

Thursday, 7 July 2016

This week, the Ontario amended Regulation 664 to expand the definition of a fleet to accommodate ride-sharing services. The change opens the door for insurers to offer policies to drivers of vehicles for hire using an online app such as Uber.

The regulation amendment expands the fleet definition to include vehicles available for hire through a common online-enabled application or system for pre-arranged transportation. The vehicle owner or lessee is to be a named insured under an auto insurance contract. The regulation change will make it easier for Ontario businesses to insure a group of privately owned vehicles under one insurance policy as a “fleet” when they are available for hire using an online app.

FSCO has already approved a fleet policy proposed by Intact Insurance Company.
The Intact policy provides blanket fleet coverage under a standard automobile owner’s policy (OAP 1) for private passenger automobiles used in the transportation of paying passengers who utilize Uber. The Intact fleet policy only provides coverage when the driver is logged onto the Uber online app. In other situations, coverage under the personal owner’s policy for the automobile is applicable.

FSCO has also approved the use of an electronic insurance card for use in connection with ride-sharing. The electronic insurance card will permit ride-sharing drivers, who are covered under the Intact policy the option, to provide evidence of insurance electronically using an online-enabled app (e.g., to law enforcement officials).

Tuesday, 21 June 2016

The Ontario government should establish a new organization that would perform the functions currently performed by the Financial Services Commission of Ontario (FSCO) and the Deposit Insurance Corporation of Ontario (DICO), an expert advisory panel said in a report released Monday.

The panel recommends that a new Financial Services Regulatory Authority (FSRA) be established, and it should exercise both prudential and market conduct functions. The panel – comprised of George Cooke, James Daw and Lawrence Ritchie – made its recommendation to create FSRA in an interim report released in November, 2015. The final report, dated March 31, was made public Monday and contains 44 recommendations.

The report suggests that FSRA should consolidate functions, but it should have separate
divisions for the regulation of market conduct; prudential oversight; and pension administration.
These divisions of the regulator should operate in a coordinated manner, but each division
should be insulated from the routine regulatory activities, pressures and resource demands of
other divisions.

FSRA should be a self-funded corporation without share capital,
operationally independent of government, yet accountable to the Legislature through the
Minister of Finance. The FSRA should be outside of the Ontario Public Service and be empowered to hire its personnel from outside of
the Ontario Public Service’s collective agreements, compensation restraints, and other
hiring restraints to support its ability to recruit professionals and industry expertise as it
deems necessary.

FSRA should have a skills-based Board of Directors appointed by
the Lieutenant Governor in Council. The Board would oversee FSRA’s operations and the
Board should have the authority to appoint a Chief Executive Officer (CEO). The Board Chair should report directly to the Minister of Finance.

FSRA’s Board should be given authority to make rules that would be enforceable pursuant to
the statute, having a similar authority as Cabinet Regulations.

Auto Insurance Rate Regulation

The panel did not make any recommendations with respect to the prior approval of auto insurance. However, it did recommend that FSRA’s Board should be obliged
and empowered to decide how auto insurance rates are to be regulated and make use of its rule-making authority to scope out a rate approval process.

The view of the panel is that when it comes to the regulation of
automobile insurance rates, FSCO is not ultimately protecting the public interest or enhancing
confidence in the sector.

Motor Vehicle Accident Claims Fund

The panel recommends that responsibility for operating the Motor Vehicle Accident Claims Fund (MVACF) be transferred to the Facility Association (FA), a
non-profit organization funded by automobile insurers in
the provinces and territories that operate private
insurance systems. This responsibility would fit well with
the FA’s original purpose, which is to act as the ‘insurer
of last resort’ for high-risk drivers. The FA already
operates uninsured motorist funds similar to the MVACF
in the Atlantic Provinces.

Fraud Prevention

The panel indicated that the new mandate should require FSRA to utilize its statutory authorities to
adequately, firmly and consistently discourage fraudulent activities or behaviours that
mislead or harm consumers and pension plan beneficiaries.

FSRA should be directed to identify and seek to eliminate gaps in
protection for consumers who might be defrauded by licensed sales agents, brokers and
corporations. FSRA should also have the authority to establish a fraud compensation fund such
as exists in Quebec if or where enhancements to mandatory insurance coverage would not
fully close current gaps.

There is no word from the government on implementing the panel's recommendations.

Thursday, 26 May 2016

On April, 1, 2016, Ontario's Licence
Appeal Tribunal's (LAT) Automobile Accident Benefits Service (AABS) was
officially open for business. After 26 years, the Financial Services Commission
of Ontario (FSCO)'s Dispute Resolution Group stopped accepted new applications.
The transfer of responsibility has created considerable apprehension among its
users. FSCO was flooded with new applications in the weeks leading up to April
1st. For many, it's a matter of 'better the devil you know.' What will this change mean for stakeholders? Will it really be different?

How did we get here?

The establishment of the AABS at LAT
brings to a conclusion a process that began with the appointment of the
Honourable J. Douglas Cunningham in August, 2013. Justice Cunningham was asked
to review the auto insurance dispute resolution system. He was asked to make
recommendations to the government to address a significant backlog, in disputed
autoinsurance claims pending mediation and arbitration, that
existed at the time - and to propose system improvements.
His report - delivered in February 2014 - included 28 recommendations. As a
result, Bill 15, the Fighting Fraud and Reducing Automobile Insurance Rates
Act, 2014 included a provision transferring responsibility for resolving
disputes over statutory accident benefits from FSCO to LAT. Regulation changes
filed by the government on March 7, 2016 - which came into effect on April 1 -
was the final step in implementing the new dispute resolution system.

What are the changes?

The only dispute resolution process
available to parties is an arbitration through LAT.

Mandatory mediation is no longer part of
the dispute resolution process.

No court action can be commenced for
statutory accident benefits disputes, even where there is a companion tort
action.

There is no right of appeal, other than
a reconsideration option with the Executive Chair of the Safety, Licensing
Appeals and Standards Tribunals of Ontario (SLATSTO) for exceptional
circumstances and the Divisional Court on a question of law.

A total of 22 new full-time and
part-time LAT adjudicators have been appointed to date. Auto insurance
stakeholders will be interacting with a largely unknown group of adjudicators
as only three have had experience resolving disputes at FSCO.

LAT is committed to resolving most (90%)
disputes within six months.

What happens to FSCO?

Applications for mediation, neutral
evaluation and arbitration have not been accepted since March 31, 2016. A
mediation, arbitration, court proceeding, appeal, variation or revocation that
was commenced before April 1, 2016 may be continued at FSCO after that date. If
a mediation fails before April 1, 2016 , an application for arbitration can
only be made to the LAT on or after April 1, 2016. Applications to the Director
of Arbitrations - for appeals, variation or revocation - may only be made where
the application for arbitration was received by FSCO before April 1, 2016.

How does LAT work?

Since there is no longer mandatory
mediation, an applicant will be able to apply for arbitration following the
denial or termination of statutory accident benefits. The applicant (an insured
or insurer) files an Application for Arbitration with LAT. The other party
files a response.

It is intended that all procedural issues,
lack of production, or failures to attend insurer examinations are to be dealt
with upfront by the Registrar. LAT may dismiss an application without a hearing
if (1) the claim is an abuse of process, (2) the matter is outside the
Tribunal's jurisdiction, (3) the statutory requirements for bringing the
application have not been met, or (4) the party filing the application has
abandoned the process. This is a significant departure from the FSCO process
which included preliminary hearings. However, if LAT is reluctant to dismiss
these applications, then the gatekeeper function, envisioned by Justice
Cunningham, will not be put into practice.

The first step in the arbitration process
is a case conference. This is the settlement meeting described in Justice
Cunningham's report. It must take place within 45 days of the date LAT receives
an application. The case conference is analogous to a FSCO pre-arbitration
meeting except most will take place over the phone instead of in-person. Prior
to the case conference, the parties are required to outline the documents to
used at a hearing, any production issues, the preference for the type of
hearing (written, video/telephone or in-person), a list of witnesses and
details of the most recent settlement offer.

Should the dispute not be resolved at a
case conference, then a hearing will take place within 60 days. The type of
hearing will be decided by the adjudicator at the case conference. Decisions
will be issued within 30 days for written hearings, within 45 days for
video/telephone hearings and 60-90 days for in-person hearings.

Lingering concerns

There is no LAT appeal process other than
the possibility of a reconsideration by the Executive Chair of SLATSTO if there
is a clear error that was made by the adjudicator. Appeals based on merit are
not available. A party can apply for judicial review where there is a question
of law.

Is this a significant departure from the
FSCO process?

The
simple answer is yes. But how much different can only be determined over time.
The forms and practice rules are simpler. In an attempt to create a different
culture, very few FSCO arbitrators have been appointed to LAT. Some see this as
a good thing while others are concerned. But it does add an element of
uncertainty for an initial period.

There are other elements of the new
process to be concerned about. Justice Cunningham recommended the creation of
statutory timelines and sanctions regarding settlement meetings (case
conferences), arbitration hearings and the release of arbitration decisions. He
felt that there need to be strict adherence to timelines and that creating
statutory obligations was the most effective way of accomplishing this.
However, no statutory timelines have been created and instead LAT will manage
timeline requirements. This is essentially how things existed at FSCO. What
will happen if the parties are not ready for a quick hearing? Will adjournments
become common occurrences? Stakeholders will be waiting to see if the promised
timelines will be met or erode over time.

In response to criticism of FSCO practices
in conducting mediations, Justice Cunningham recommended that settlement
meetings (case conferences) be conducted in-person or by video conferencing. He
rejected telephone meetings. LAT will
predominantly be conducting case conferences over the phone. Considering that
FSCO pre-arbitration meetings are in-person, this is really a step backwards.

Justice Cunningham wanted hearings to
follow three streams: paper reviews, expedited in-person hearings and full
in-person hearings. He recommended criteria be adopted to determine which
stream a case falls under. Those criteria have not been adopted. Instead, the
LAT adjudicator will exercise his or her discretion to determine the format of
a hearing. At FSCO, similar discretion existed but all hearings were
in-person. Although LAT has suggested
that many hearing will be paper reviews, will stakeholders pressure
adjudicators to provide more in-person hearings?

A number of other recommendations by
Justice Cunningham seemed to have been abandoned. The settlement of future
medical and rehabilitation benefits were to have been prohibited until two years
after the date of the accident. The SABS have not been amended and settlements
will still be permitted one year after the date of the accident. In addition,
every insurer was to establish an internal review process as the first step in
the new dispute resolution process. It does not appear that all companies have
established an internal review process.

Conclusion

A lot of time and effort has gone into
creating the AABS at LAT to replace the dispute resolution process at FSCO. One
of the problems identified by Justice Cunningham has been the culture
surrounding the previous system. LAT has
made a considerable effort to create a new culture. However, the new
adjudicators will be dealing with the same clientele and will need to interpret
the same complex and frustrating statutory accident benefits. It will take some
time to determine how much different the new system is.

Tuesday, 26 April 2016

FSCO's latest quarterly rate approval numbers have been released and suggest that some savings have been accrued from the statutory accident benefit cuts that become effective on June 1.

FSCO approved 50 private passenger automobile insurance rate filings during the first quarter of 2016. All 50 filings were automobile insurance reform filings. These 50 insurers represent 83.36% of the market based on premium volume. Approved rates decreased on average by 3.07% when applied across the total market. This is the largest drop in rates since the fourth quarter of 2013 when approved rates decreased on average by 3.98% when applied across the total market.

Although the government has begun to distance itself from the 15% rate reduction promise made in August 2016 (likely an admission that it can't be achieved), most people are, at least, curious how close the latest round of cuts got us to 15%. If you aggregate all the rate changes since the 2013 announcement, the total rate reduction is 10.17% when applied across then total market. There may be further reductions in the next quarter but it's safe to say that this is about it.

Friday, 18 March 2016

The Licence Appeal Tribunal
(LAT) begins accepting applications to resolve auto insurance disputes on April
1, 2016. LAT has completed a first round
of recruitment for adjudicators and case management staff. Adjudicators are Order-in-Council
appointments. Training of adjudicators
and staff is underway.

FSCO will continue to
operate beyond April 1, 2016. If
mediation has been completed, but the arbitration process has not begun, a
party can apply to LAT and begin the new process. If the case already has been assigned an
arbitration case number by FSCO, the case remains at FSCO. Existing cases will not be transferred from
FSCO to LAT.

Although the new system follows the
recommendations put forth by Justice Cunningham in 2016, a number of
recommendations have been modified:

Justice Cunningham
recommended that mandatory mediation (along with pre-arbitration hearings) be
eliminated and that a settlement meeting be held before arbitration
(Recommendations #4 and #13). LAT has
created a case conference prior to arbitration which follows the intent of
settlement meetings proposed by Cunningham.

Justice Cunningham
recommended that statutory timelines and sanctions regarding settlement meetings,
arbitration hearings and the release of arbitration decisions be created
(Recommendation #6). However, no
statutory timelines have been created and LAT will manage timeline
requirements. This is essentially the
status quo.

Justice Cunningham
recommended that the policy of no application fees for claimants at the
settlement meeting stage be continued (Recommendation #7). LAT has introduced a $100 application fee.

Justice Cunningham
recommended that settlement meetings be conducted by video conferencing rather
than by telephone in cases where it is not feasible for the parties to meet in
person (Recommendation #14). LAT is continuing
the current practice and most case conferences will take place over the phone.

Justice Cunningham
recommended an adjournment fee be charged to the party requesting an
adjournment in the absence of exceptional circumstances (Recommendation #16). No adjournment fee has been established.

Justice Cunningham
recommended that the settlement of future medical and rehabilitation benefits be
prohibited until two years after the date of the accident (Recommendation #17). The SABS have not been amended and
settlements will still be permitted one year after the date of the accident.

Justice Cunningham
recommended that each insurer establish an internal review process (Recommendations
#19, #20 and #21). A company internal
review process has not yet been established.

Justice Cunningham
recommended criteria for streaming disputes to paper reviews, expedited
in-person hearings and full in-person hearings (Recommendations #25, #26 and
#27). The criteria have not been
adopted. LAT adjudicators will exercise
his or her discretion to determine the format of a hearing, which is the status
quo.

Willie Handler and Associates

I am operating a consulting practice following 33 years in various positions in the Ontario public service. During that time I have become one Ontario’s foremost expert on auto insurance having worked for 20 years on auto insurance regulatory policy for the Ontario government including 4 major reforms of the Ontario auto insurance system.

My consulting work has included advice on anti-fraud measures, a proposal on licensing on health care clinics, recommended reforms to Ontario's auto insurance dispute resolution system and research on disability management systems and territorial rating. I am available to work with government, the insurance industry and the rehabilitation sector.